Thousands of retirees each year assume that post-surgery therapy is fully covered, only to find out too late that Medicare has very specific guidelines.

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Picture this: You’ve just undergone a knee replacement. The surgery goes smoothly, and your doctor prescribes physical therapy for recovery. Seems simple enough, right?

Here’s where things get tricky: Medicare doesn’t automatically cover all post-surgery therapy. In fact, if certain conditions aren’t met—like being admitted to the hospital as inpatient versus under observation—you could be stuck paying out of pocket for rehab or skilled nursing care.

It sounds like a minor technicality, but it can make a world of difference. The rule? You must be admitted as an inpatient for three consecutive midnights before Medicare will cover rehabilitation in a skilled nursing facility. Observation status, even if you stay in the hospital for several days, doesn’t count.

Many retirees don’t find out until discharge. They’re handed a list of rehab centers and told they’ll need to pay unless their inpatient stay qualifies. For many, that’s a financial gut punch—especially after a costly surgery.

Another catch? Even if you do meet the requirements, therapy services must be considered medically necessary and part of a care plan from a Medicare-approved provider. Miss one step, and you risk losing coverage.

What’s worse: this information isn’t often explained clearly up front. Hospitals aren’t required to make this distinction obvious. And while the Medicare rule isn’t new, it’s still a surprise to most.